You have to decide for yourself if putting the time and effort into a married put trading strategy is “worth your time”. But you’re not alone! Investors have contacted us with similar concerns and questions. They want to know if trading any strategy themselves is going to be better than just buying into an index ETF and/or better return than their “advisor” can do for them. Most of them have come to the conclusion that they would try a strategy with some of their funds for a specified amount of time to see how it goes. Then, at the end of the 1 or 2 years, re-assess to see if they and their strategy were able to do better than an index fund or their money manager.
At the Power Financial Group, Inc., we are biased. We are all self-directed traders. We enjoy trading the markets and trying to beat the advisor’s and indexes. It may not always happen, but it is the pursuit and principle that drives us. We want to be in control of our own destinies, rather than deferring to an advisor or fund manager.
If the stock market in general can return 10% per year over the long term, then 20% a year with a “hedged” stock investment method like RadioActiveTrading probably won’t be easy to do. But, the returns you see will be totally dependent on the stocks that you pick. Using the married put strategy the way we do usually means that you can participate in about half of the gain a stock makes when your picks are right, and your downside is always limited and controlled. So, to do 20% a year, you would have to be the kind of stock picker that can find stocks that will move 30% or more up pretty regularly, and you have to coordinate the IMs pretty well also. The returns you see will be very dependent on general market conditions and the stocks you pick.
Our mission is to give anyone and everyone the options education, options research tools and confidence to be a self-directed trader. By learning the concepts in The Blueprint, we feel that anyone has a chance to be successful, and if they are not, at least they didn’t squander ALL of their trading capital by trying to chase after 5 to 10% per month returns. Fission has had some trades that returned 40%+, but they are not the norm. Home run trades like that can happen if your in position for them to, and we think that the RadioActiveTrading method allows for that positioning.
I'm Kurt Frankenberg, and I have discovered how to truly put the odds on the side on the individual investor.
Kurt, do you decide which Married Put to buy purely based on risk? Is is there a sweet spot where later Put swaps can be done more readily or something like this?
Here is a scenario for stock symbol ANF (current price $30.47):
AUG 10 PUT
Strike Price Premium Cost Basis $ at Risk % at Risk
$35 $6.7 $37.17 $2.17 5.8
$37 $8.3 $38.77 $1.77 4.6
$38 $9.1 $39.57 $1.57 4.0
$39 $9.9 $40.37 $1.37 3.4
$45 $15.3 $45.77 $0.77 1.7
Based purely on risk I would buy the deep in the money $45 Put for the $15.3 premium. This would only be risking 1.7% of the outlay! Why would you buy another one instead of this one?
Keith
Good question, Keith!
Well, it’s simply a matter of Expectation. In order for your RPM setup to make any money, it’s just good business to expect that the price of the underlying stock itself will approach the strike price.
That’s not to say that you CAN’T make money until the stock gets to that price… but it’s a durn sight easier.
Well, what shall we say about expectation? Expectation is a trader’s way of balancing risk with reward.
If I have a 10% chance of making 300% on my money, and bet often enough I’ll lose in the end. One in ten winners tripling my money doesn’t stack up to the nine in ten times that I’ll lose.
OTOH, if I have a 50/50 chance of winning only 10%… and I lose only 5% if I’m wrong… Well, now THERE’s a game I’d play all day and twice every Sunday.
This is what I mean by balancing risk and reward. The reward may be very high if you risk 1.7 on ANF and get back 5.1 — and that’s POSSIBLE– but highly unlikely.
Likewise, if you were to buy the $20 strike you’d end up spending for an out of the money put that you wouldn’t likely use and that would not protect you very well even if you did.
You can risk too much… and you can risk too LITTLE. Risking too little in this ANF trade would mean insuring yourself at too high a level, a level to which the stock may never climb.
It’s more sensible to assume a slighter higher risk AMOUNT if the LIKELIHOOD of it making a return is in balance.
About the “sweet spot” you mentioned… let me refer you to The Blueprint! It’s all in there.
Happy Trading!
Kurt